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IN THE HIGH COURT OF JUDICATURE OF BOMBAY BENCH AT GOA
M.S. Sonak, M.S. Jawalkar, JJ.
Nirupa Udhav Pawar - Appellant
Versus
Assistant Commissioner & Ors. - Respondents
Writ Petition No. 1145 of 2017
Decided On : 06-10-2021
Income Tax Act - Notices under Section 148 - Summary of Acts and Sections: Section 148 of the Income Tax Act - The court discussed the legal provisions of Section 147/148 of the Income Tax Act and emphasized the importance of reasons recorded by the assessing officer for reopening the assessment. The court highlighted the requirement of tangible material and cogent facts for invoking powers under Section 147, and the need for a direct nexus and a live link between the reasons and the belief that taxable income has escaped assessment. The court also emphasized that the reasons recorded at the time of issuing the notice cannot be supplemented or varied, and any new reason cannot be advanced to add to or supplement the reasons already recorded. The court referred to various decisions including Hindustan Lever Ltd. v. R.B. Wadkar, GKN Sinter Metals Ltd. v. Ramapriya Raghavan, and Oriental Insurance Co. v. Commissioner of Income-tax to support its decision.
Fact of the Case:
The petitioners challenged the notices dated 24.03.2017 and 31.03.2017 issued under Section 148 of the Income Tax Act seeking to reopen the assessment for the Assessment Year 2010-2011. The petitioners had purchased a property in 2006, and in 2010, purported to transfer the property to another party. However, the cheques for the transfer were dishonored, and the petitioners filed a suit seeking cancellation of the sale deed. Subsequently, a deed of sale was entered into in 2014, and the entire consideration was received by the petitioners. The Department issued notices alleging that income had escaped assessment for the Assessment Year 2010-2011, which the petitioners contested.
Finding of the Court:
The court found that the reasons recorded by the assessing officer for reopening the assessment were based on the alleged receipt of sale consideration during the Assessment Year 2010-11, and not on the basis of accrual of income. The court held that the impugned notices were required to be quashed and set aside as there was no failure on the part of the petitioners to disclose fully or truly all material facts necessary for the assessment Year 2010-11. The court emphasized the importance of the reasons recorded at the time of issuing the notice and held that the impugned notices cannot be supported by any additional material which does not find a place in the reasons recorded while issuing the notice.
Issues: The issues involved in the case included the validity of the notices issued under Section 148 of the Income Tax Act, the requirement of tangible material and cogent facts for invoking powers under Section 147, and the need for a direct nexus and a live link between the reasons and the belief that taxable income has escaped assessment.
Ratio Decidendi: The court's decision was based on the legal principles that the impugned notices for reopening of an assessment should stand or fall based on the reasons recorded at the time of issuing the notice, and the reasons cannot be supplemented or varied. The court emphasized the requirement of tangible material and cogent facts for invoking powers under Section 147, and the need for a direct nexus and a live link between the reasons and the belief that taxable income has escaped assessment.
Final Decision: The court allowed the petition and quashed and set aside the impugned notices, ruling in favor of the petitioners.
JUDGMENT
M.S. Sonak, J. - Heard Mr. Hanumant Naik for the Petitioners and Ms. Amira Razaq for the Respondents.
2. Rule. With the consent of and at the request of the learned counsel for the parties, the Rule is made returnable forthwith. Even otherwise, the learned counsel for the parties had requested that this petition be disposed of finally at the stage of admission itself, since, the pleadings were complete.
3. The challenge in this petition is to the notices dated 24.03.2017 and 31.03.2017 issued under Section 148 of the Income Tax Act (said Act) seeking to reopen the assessment for the Assessment Year 2010-2011.
4. Ms. Razaq, at the outset, submitted that the petition is premature insofar as petitioner no.2 is concerned. She submitted that the procedure prescribed by the Hon'ble Supreme Court in G.K.N. Driveshaft (India) Limited v. Income Tax Officer 259 ITR 19 was never followed insofar as the petitioner no.2 is concerned.
5. Technically, Ms. Razaq may have a point, but in the peculiar facts of the present case, there is no point in relegating petitioner no.2 to follow the said procedure. This is because it was even admitted by Ms. Razaq that there is no difference whatsoever, either on facts or in law insofar as the positions of the two petitioners are concerned. She pointed out that petitioner no.2 is the husband of petitioner no.1 and having regard to the provisions of Section 5A of the said Act, which are peculiar to the persons from Goa, the Department had to issue separate notices to both the petitioners.
6. Since, there is no difference whatsoever in the positions of the two petitioners, either on facts or in law, we believe that no purpose would be served by bifurcating the matter and relegating petitioner no.2 to follow the prescribed procedure at this belated stage. Besides, it was conceded that the fate of the second petitioner's case will almost entirely depend upon the fate of the first petitioner's case. Ms. Razaq also fairly pointed out that though there was no stay granted in respect of the notice issued to petitioner no.2, the Department stayed its hands in deference to the interim order made in favor of petitioner no.1. This was because the factual, as well as legal position concerning both the notices, was the same. Having regard to all these factors, no purpose will be served in upholding the objection raised by Ms. Razaq qua the case of the second petitioner. There is no dispute that the procedure prescribed in G.K.N. Driveshaft (India) Limited (supra) was followed insofar as the first petitioner is concerned.
7. A brief reference to some factual aspects is necessary to appreciate the challenges raised in this petition. Admittedly, petitioner no.1 purchased a property bearing Survey No.26/2 at Baiguinim in a public auction held by the Goa State Co-operative Bank for a consideration of `1.36 crores or thereabouts. This is evidenced by the Sale Certificate dated 17.05.2006 issued by the competent authority. This Sale Certificate has been duly registered before the competent Sub-Registrar.
8. By sale deed dated 02.02.2010 the petitioner no.1 purported to transfer the suit property in favor of Nagueshwar Pandey for total consideration of `3 crores. Pandey issued four cheques to cover this amount out of which two cheques were post-dated. The sale deed dated 02.02.2010 specifically states that the sale was subject to realization of the cheques issued by said, Pandey.
9. There is no dispute that the cheques amounting to `2 crores were dishonored and the petitioner no.1, ultimately received an amount of only `1 crore. There is also no dispute that petitioner no.1 filed a Civil Suit bearing No.43/2012/C before the Civil Judge, Junior Division at Panaji seeking cancellation of the registration of sale deed dated 02.02.2010 urging inter alia that the transfer was subject to realization of the cheque amount and in the absence of realization, there was no sale of the said property.
10. Parallelly, M/s. Amina Developers Pv
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